SMM Morning Comment For SHFE Base Metals (Jan 15)

SHANGHAI, Jan 15 (SMM) –

Copper

Weak Consumption but Lower US Dollar Index; Copper Prices Expected to Have Bottom Support [SMM Copper Morning Comment]

Overnight, LME copper opened at $9,160.5/mt, initially declined to a low of $9,107.5/mt during the session, then fluctuated upward, reaching a high of $9,170/mt by the end of the session, and finally closed at $9,164/mt, with open interest at 280,000 lots. Overnight, the most-traded SHFE copper 2503 contract opened at 75,500 yuan/mt, initially fluctuated widely and hit a low of 75,360 yuan/mt, then climbed steadily, reaching a high of 75,750 yuan/mt by the end of the session, before slightly retreating to close at 75,670 yuan/mt, up by 0.33%, with trading volume at 17,000 lots and open interest at 150,000 lots. Macro side, the US December PPI data fell short of expectations, the US dollar index edged lower, and crude oil continued to rise, all providing support for copper prices. On the fundamentals, SHFE registered warehouse warrants currently stand at approximately 11,000 mt, indicating tight deliverable supply in the market, which supports premiums to some extent. However, from the consumption perspective, as the year-end approaches, overall market consumption remains weak. In summary, with the US dollar index declining and crude oil continuing to rise, copper prices are expected to remain supported at the bottom today.

Aluminum

Downstream Demand Continues to Decline, Spot Market Trading Weakens

Overnight, the most-traded SHFE aluminum 2503 contract opened at 20,285 yuan/mt, hitting a high of 20,300 yuan/mt and a low of 20,185 yuan/mt, before closing at 20,230 yuan/mt, down 70 yuan/mt or 0.35%. Overnight, LME aluminum opened at $2,575/mt, peaked at $2,602/mt, bottomed at $2,553/mt, and closed at $2,573.5/mt, unchanged from the previous trading day.

Summary: Currently, macro factors are mixed. The Chinese government continues efforts to boost consumption, regional conflicts remain unresolved, and uncertainty persists regarding the US Fed's interest rate cut pace. Fundamentals side, early January aluminum capacity remained largely stable, while alumina fundamentals showed a slight surplus, with spot alumina prices likely to continue their downward trend in the short term. On the cost side, the aluminum industry's costs are expected to keep declining. On the demand side, market demand weakened during the off-season, with operating rates in the aluminum processing industry declining steadily. Some aluminum processing plants are nearing the holiday period. Although pre-holiday concentrated stockpiling led to an unexpected inventory reduction, its sustainability is expected to be limited. Key areas to watch include the impact of falling spot alumina prices on aluminum costs, as well as downstream holiday schedules and the continuation of pre-holiday stockpiling trends.

Lead

Pre-Holiday Downtime in Downstream and Cost Factors Intertwined, Short-Term Lead Prices May Maintain a Consolidation Trend

Overnight, LME lead opened at $1,952.5/mt. During the Asian session, trading was sluggish with LME lead fluctuating between $1,945-1,950/mt. Later, the US dollar index reversed and pulled back, while LME lead inventory declined. During the night session, LME lead stopped falling and rebounded, eventually closing at $1,969/mt, up 1.08%.

Overnight, the most-traded SHFE lead 2502 contract opened at 16,530 yuan/mt. Pressure from inventory buildup due to lead ingot delivery persisted, while battery scrap prices rose against the trend, pushing up secondary lead costs. SHFE lead surged strongly after the opening, reaching a high of 16,680 yuan/mt. By the close, longs took profits, and SHFE lead gave back part of its gains, finally settling at 16,625 yuan/mt, up 0.82%. Its open interest decreased by 2,757 lots to 32,242 lots compared to the previous trading day.

Macro: PBOC stated that it will further strengthen counter-cyclical adjustments and adjust and optimize policy intensity and pace when appropriate. In December, China's new social financing reached 2.86 trillion yuan, with new RMB loans at 990 billion yuan, and the M2-M1 gap narrowed. In the US, December PPI unexpectedly cooled, with MoM growth slowing to 0.2%, driven by a drop in food prices. The two-year US Treasury yield hit a new intraday low.

Spot Fundamentals :

Yesterday in the lead spot market, SHFE lead fluctuated downward. As the delivery date approached, limited circulating supply in Jiangsu, Zhejiang, and Shanghai led suppliers to stand firm on quotes. Meanwhile, ex-factory premiums for cargoes from smelters were lowered, especially in South China, where high premiums eased. Downstream enterprises purchased on dips as needed, and spot order transactions were moderate in certain regions. For primary lead, smelter inventories were relatively low, with spot order quotations at premiums of 0-150 yuan/mt against the SMM 1# lead average price ex-factory. In mainstream trade markets like Jiangsu, Zhejiang, and Shanghai, domestic lead mainstream quotations were at premiums of 20-80 yuan/mt against the SHFE lead 2502 contract. For secondary lead, smelters gradually resumed production, increasing circulating supply in the spot market. Secondary refined lead quotations were at premiums of 0-100 yuan/mt against the SMM 1# lead average price ex-factory.

Inventory: As of January 14, LME lead inventory decreased by 2,600 mt to 220,575 mt. As of January 13, the total social inventory of lead ingots in five regions monitored by SMM stood at 47,600 mt, down 600 mt from January 6 but up 1,700 mt from January 9.

Today marks the delivery date for the SHFE lead 2501 contract, with expectations of visible inventory increases due to warehouse transfers. Recently, some large secondary lead smelters have resumed production, leading to relatively ample circulating supply in the lead market. Spot premiums for both primary and secondary lead have gradually declined. On the consumption side, as the Chinese New Year approaches, downstream enterprises are conducting their final pre-holiday restocking, suggesting limited short-term inventory buildup for lead ingots. Additionally, increased production by secondary lead enterprises has driven up demand for battery scrap, causing its price to rise against the trend. This has pushed up secondary lead costs, which may support lead prices to maintain a consolidating trend.

Zinc

SHFE Zinc Recorded a Small Bearish Candle with Prices Mainly Fluctuating at Low Levels

Overnight, LME zinc opened at $2,869.5/mt. In early trading, LME zinc fluctuated around the daily moving average before its center shifted downward to test a low of $2,845.5/mt. During European trading hours, the center moved upward to $2,880/mt, reaching a high of $2,888/mt during the night session. By the end of the session, the center pulled back, closing down at $2,868.5/mt, a decrease of $7.5/mt or 0.26%. Trading volume increased to 11,145 lots, while open interest decreased by 1,792 lots to 217,000 lots. Overnight, LME zinc formed a doji candlestick, with the 5-day moving average providing support below and the 10-day moving average acting as resistance above. Overnight PPI data unexpectedly came in lower than anticipated, the US dollar index declined, but most commodities entered a holiday period, with prices fluctuating downward as the main trend.

Overnight, the most-traded SHFE zinc 2502 contract opened at 24,155 yuan/mt. After an initial tug-of-war between longs and shorts, the bulls gained the upper hand, pushing the price to a high of 24,255 yuan/mt. Subsequently, increased short positions caused the center of SHFE zinc to shift downward, closing down at 24,155 yuan/mt, a decrease of 15 yuan/mt or 0.06%. Trading volume decreased to 51,711 lots, while open interest decreased by 998 lots to 94,145 lots. Overnight, SHFE zinc formed a bearish candlestick, with various moving averages above acting as resistance. Downstream sectors are gradually entering the holiday period, and processing fees continue to rebound, leading zinc prices to primarily oscillate at low levels.

Tin

SHFE Tin Prices Continue to Pull Back, Spot Market Transactions Gradually Become Active

Last night, the SHFE tin market opened with a sharp decline, stabilizing around 247,000 yuan/mt. Subsequently, prices fluctuated rangebound around 247,500 yuan/mt. Reviewing yesterday's spot market, trading was very active, with some traders' inventories already cleared out as they entered holiday mode. As prices gradually pulled back, downstream purchasing sentiment rebounded, with some companies making small-scale purchases and others opting for a later pricing model. Market feedback indicated that most downstream companies expected to halt production and take a break around the Little New Year, with the spot market also entering the Chinese New Year holiday. If SHFE tin prices continue to pull back, downstream companies may complete their pre-holiday restocking this week.

Nickel Sulphate:

On January 14, the SMM battery-grade nickel sulphate index price was 26,423 yuan/mt, with the quotation range for battery-grade nickel sulphate at 26,050-26,950 yuan/mt, and the average price remained unchanged from the previous day.

Cost side, LME nickel prices rebounded slightly today to $15,860/mt (Ni contained), with spot cost support continuing to strengthen. Currently, the spot profit for producing nickel sulphate using MHP remains in a loss state, while the profit margin for producing nickel sulphate using high-grade nickel matte persists. Demand side, most precursor plants have basically completed their January nickel salt stocking, with a small portion still having restocking demand. Market inquiry activity was weak today. Supply side, nickel sulphate plants currently maintain low levels of finished product inventories, with tight supply. Overall, under the tight supply pattern, prices still have room for an upward trend.